Nakabohtec Corrosion Protecting Co.,Ltd.

The core business of anti-corrosion works for harbor-related facilities is primarily oriented toward government agencies, and is therefore significantly affected by trends in public investment. However, anti-corrosion works aimed at extending the service life of infrastructure represent a mid- to long-term tailwind even under fiscal constraints, and the Company recognizes that the risk of a substantial nationwide decline in government demand is extremely low for the foreseeable future. Temporary fluctuations in demand are addressed through cost reduction, productivity improvement, and the development of new targets for anti-corrosion work.

In many cases, anti-corrosion construction work is subcontracted to the Company by general contractors that serve as the prime contractor for the overall project; however, in public works projects, small-scale construction companies often win the prime contract through bidding, giving rise to credit risk. Since the creditworthiness of business counterparties varies, there is a possibility that losses such as non-collection of receivables may occur. The Company strives to minimize the occurrence of credit-related problems by strengthening its internal credit management system.

If prices of key raw materials such as aluminum ingots rise, delays in passing on the increase to product prices could reduce sales profit. As countermeasures, the Company works to minimize the time lag in reflecting cost increases in product prices by providing information to various research bodies and government agencies, and adjusts the timing and volume of purchases appropriately by obtaining daily information from ingot trading companies.

There is a risk that competition will intensify due to the inflow of anti-corrosion materials from overseas and the entry of domestic companies from other industries into the business. The Company's strength lies in the customer trust built through its technical and sales capabilities cultivated over many years as a specialized anti-corrosion company that handles surveying, design, manufacturing, and construction on an integrated basis, and it seeks to maintain competitiveness through continuous cost reduction.

Since the Company's business targets are mainly steel structures, there is a certain anticipated risk that demand for anti-corrosion work could be lost if a shift from steel to other materials progresses. However, the Company judges that this would not have a major impact on the business from a mid- to long-term economic perspective, among other considerations.